{"id":78202,"date":"2015-09-14T04:25:11","date_gmt":"2015-09-14T08:25:11","guid":{"rendered":"http:\/\/countingpips.com\/?p=78202"},"modified":"2015-09-14T07:41:09","modified_gmt":"2015-09-14T11:41:09","slug":"these-two-cheap-dividend-stocks-are-on-sale","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/09\/these-two-cheap-dividend-stocks-are-on-sale\/","title":{"rendered":"These Two Cheap Dividend Stocks Are on Sale"},"content":{"rendered":"
September 14, 2015<\/div>
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By WallStreetDaily.com<\/u><\/a> \"Dividend<\/p>\n

By Alan Gula<\/a>, Chief Income Analyst <\/em><\/p>\n

Mike Tyson once said, \u201cEveryone has a plan until they get punched in the mouth.\u201d<\/p>\n

Now, we may not be climbing into the ring with a professional boxer anytime soon, but the financial markets we tangle with on a daily basis also have an uncanny ability to surprise, inflict pain, and otherwise ruin our best-laid plans.<\/p>\n

The stock market decline in late August is a perfect example.<\/p>\n

A wave of selling pressure culminated in a flash crash<\/a> on August 24. Many traders and investors simply couldn\u2019t withstand the pain and sold into the panic.<\/p>

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However, those who were prepared were far better able to withstand the barrage \u2013 and having a healthy allocation of volatility-dampening fixed-income securities has certainly helped.<\/p>\n

For instance, the Vanguard GNMA Fund<\/strong><\/a> (VFIIX<\/a>) I profiled in June 2014 has produced a nice and steady 3.8% total return since then. Meanwhile, the SPDR S&P Dividend ETF<\/strong> (SDY<\/a>) has limped to a 0.3% total return with erratic ups and downs.<\/p>\n

Once again, dividend stocks aren\u2019t bond substitutes. Besides being properly diversified, your plan may also involve gradually reducing your fixed-income allocation and increasing your equity exposure during times of market stress.<\/p>\n

The question then becomes what stocks to buy.<\/p>\n

Focus on Cash Flow<\/h2>\n

Investors should look for stocks that have become inexpensive, but still have strong underlying businesses generating healthy free cash flow (FCF).<\/p>\n

Corning Inc.<\/strong> (GLW<\/a>), a specialty glass maker, and The Mosaic Company<\/strong> (MOS<\/a>), which produces crop nutrients such as potash, are two prime examples.<\/p>\n

These stocks have respectable dividend yields above 2.5%. Plus, dividend payout increases and<\/em> share buyback activity are indicative of management\u2019s confidence in ongoing FCF generation \u2013 and both stocks\u2019 total yields (dividend yield plus net share buybacks) are well above average.<\/p>\n

Of course, we want to make sure that these buybacks are being conducted at low valuations and that the firms aren\u2019t becoming overly levered in order to distribute cash to shareholders.<\/p>\n

As you can see in the table below, both companies have low enterprise value-to-EBITDA<\/a> ratios, which are also at steep discounts to their 10-year averages. Their price-to-sales ratios are also well below their long-term means.<\/p>\n

\"Cheap<\/p>\n

Based on all these metrics, both Corning and The Mosaic Company qualify as cheap dividend growers. And they\u2019re the kind of stocks we want to look to buy<\/em> when everyone else is liquidating.<\/p>\n

By being properly diversified and having a plan, we reduce the likelihood that we\u2019ll panic when the market \u201cpunches us in the mouth.\u201d<\/p>\n

That\u2019s even more important, given that quantitative easing<\/a> stimulus is over and global economic growth is slowing to a crawl, which means there are likely some vicious right crosses headed our way.<\/p>\n

Safe (and high-yield) investing,<\/p>\n

Alan Gula, CFA<\/p>\n

The post These Two Cheap Dividend Stocks Are on Sale<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

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By WallStreetDaily.com By Alan Gula, Chief Income Analyst Mike Tyson once said, \u201cEveryone has a plan until they get punched in the mouth.\u201d Now, we may not be climbing into the ring with a professional boxer anytime soon, but the financial markets we tangle with on a daily basis also have an uncanny ability to […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-78202","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/78202","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=78202"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/78202\/revisions"}],"predecessor-version":[{"id":78223,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/78202\/revisions\/78223"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=78202"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=78202"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=78202"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}